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Praxair Value in a Highly Valued Market

May 15, 2013 | About:

Praxair is providing very good value in this current very possibly fully valued market of value stocks. Praxair is in the basic materials business of industrial gases production, distribution and sales globally with its main markets of North and South America, Asia and Europe. Praxair has a current P/E ratio of 20.61, a forward P/E ratio of 16.89, and market cap of $33.72 billion, with 2012 sales of $11 billion and a 2.1% annual dividend yield.

Revenues of Praxair although not seeming to be currently affecting its earnings per share were more than the industry average. Net operating cash flow increased more than 17% to $472.0 million from the prior quarter. Gross profit margin increased 43% but net profit margins were 13%, which is less than the industry average. Bottom line earnings per share decreased almost 6% from a year ago, but EPS growth is expected to grow earnings over the next year.

Year on year, Praxair grew its bottom line earnings per share to $5.61 compared to $5.45 in the previous year with forward earnings estimates expected to come in at $5.99. Return on equity was a little lower from the year ago quarter. Comparing Praxair to other chemical industry companies, it’s return on equity is more than the industry average.

More than 80% of Praxair’s revenue’s come from its industrial gas segment. The rest of its revenues come from equipment sales and services they provide. All in all, Praxair operating margins and return on investment capital have outperformed its competitors for more than 10 years now and very possibly the reason for its more than quadrupling share price growth in the same amount of time.

Praxair is currently issuing $650 in notes for repaying debts, making some share repurchases, and for general operating purposes. The recent issuing of notes is consistent in the long-term with its past issuance of notes for raising cash. Current debt to equity is about 65%.

All things considered, current fair value for Praxair looks to be almost $130 per share. Estimated annual revenue growth is 6% with the current slow growth in U.S. and Europe but with the higher growth in Asia and other emerging markets. Long-term operating margins are to be a little more than 20%.

Recent congress legislation being worked on is to create a public private partnership of the Federal Helium Program and should benefit Praxair along with its competitors and taxpayers alike as Praxair and the other industrial gas companies are already invested in refining, enriching, and the distribution of helium which brings much more value to these helium assets owned by American taxpayers. Helium is a much needed gas used to manufacturer fiber optics, MRI machines, semiconductors and communication satellites.

Long-term Praxair is providing very good value currently to many highly valued value stocks. From the looks of Praxair’s long-term price chart, the uptrend in its share price looks intact and look to very possibly continue.

The May 2, 2012 high of 116.87 is the all-time high for Praxair, which is very close to the current closing price of $114.00 at the time writing this article. Since then the price has been consolidating between a 52-week low of $100 and the recent May 3, 2013 high of $115.50.

About the author:

Successful investing trading the stock options forex and fuures markets. Trading education programs and training seminars webinars workshops and events. Fundamental technical trading software, stock analysis screeners, and advisory services.

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